Monday, March 31, 2008

Snow as a Brand

“What would you do with the fact that we get more snow than any other place east of the Rockies?” was one of the many questions I got after my talk in Watertown, NY (population 26,705).

I was there to do the 19th Annual Tug Hill Commission’s Local Government Conference which brings in over 600 local leaders from around the North Country of upstate NY. Now upstate NY to someone from NYC means just north of Westchester County, adjacent to the city, but the North Country is as far north as you can go in the state, right along the St. Lawrence Seaway and just south of Canada.

The North Country covers about 30% of the land area in the state but only has 3% of the people. It is largely an area of very small towns with a dependence upon the natural resources of the region (timber, agriculture, etc.). Many of the towns were some of the earliest mill towns in the country, making use of the virtually free rapidly flowing rivers in the region. However, those days are long gone and now it’s finding alternative sources of jobs and opportunities.

Last year in February, Redfield, NY received 141 inches of snow in one 24 hour period, just barely missing setting a new record for the country. Many of the towns normally get over 20 feet of snow during the winter and the area has become a haven for snowmobilers and other winter enthusiasts.

And, yes having that much snow should be a huge asset for a region. Just as there are enthusiasts for everything from spectator sports to bird watching to hang gliding, there are people who love the snow and being known as the place that gets the most of it should be highlighted not hidden. It could be a wonderful brand!

Thursday, March 27, 2008

Walking Away

During past financial crisis, like we are seeing today in housing, borrowers have defaulted on loans, property has been foreclosed upon and the system slowly heals itself. Today, we are seeing a completely different attitude with a growing number of borrowers. This new group, which can afford to make their mortgage payments, is instead deciding to walk away from their financial commitments because they don’t want to pay for properties in which they have negative equity.

In past major downturns (think farms and oil patches in the 80s), borrowers only walked away as a last resort generally because they couldn’t pay because of unemployment, illness, divorce or some other life-altering changes which affected their income stream. Even then the number of “walk-aways” was small.

If this trend continues, it will dramatically impact the willingness of lenders to put their money at risk through mortgage financing. It will increase interest rates in that sector and make home ownership more difficult for new buyers for many years into the future.

I hope that those who are defaulting have a change of heart, recognize the sanctity of a contract and that prices go up and they go down but a deal is still a deal. Perhaps I’m too much of a hand-shake kind of guy.

Wednesday, March 26, 2008

Crazy Ag Rules!

One of the trends that I’m seeing as I travel around the country is the growth in demand for locally produced food, particularly fruits and vegetables. It is a trend that holds great promise for rural America because these farms, which tend to be much smaller in size, use lots of local inputs and could be an impetus in helping to revitalize some towns.

You would think that the USDA would be encouraging this trend but the rules written into the Farm Bill actually discourage farmers trying to diversify. A MN farmer recently wrote this month about his frustrations in a NYT op-ed piece.

Jack Hedin, 41, who is a small organic vegetable producer near Rushford, MN rented 25 acres last year to supplement his own 100 acres to plant watermelons, tomatoes and vegetables. In July the two landowners discovered that there was a problem with the commodity farm program which prohibited planting fruit or vegetables on corn base ground, putting the land out of compliance with the Farm Bill.

Hedin related, “I’ve discovered that typically, a farmer who grows the forbidden fruits and vegetables on corn acreage not only has to give up his subsidy for the year on that acreage, he is also penalized the market value of the illicit crop, and runs the risk that those acres will be permanently ineligible for any subsidies in the future.”

He finished with, “Farmers need the choice of what to plant on their farms, and consumers need more farms like mine producing high-quality fresh fruits and vegetables to meet increasing demand from local markets—without the federal government actively discouraging them.”

I continue to wonder why we need the government’s involvement in farming. Isn’t it something that the free market would be better at?

Tuesday, March 25, 2008

California Agriculture

My travels around the USA over the past four years has impressed upon me the incredible vastness of our country and also how much of our country has very little or no development taking place. Recent trips to CA have highlighted the vastness of that state’s agricultural assets.

The University of California Agricultural Issues Center at Davis, CA
has documented the impact of agriculture in the state in a 2006 study. If CA was a country its $1.5 trillion economy would make them the sixth largest in the world behind only the USA, Japan, Germany, UK and France. California would be ahead of China, India, Brazil, Russia, Canada, Mexico, Spain and all of the other countries in the world!

In the agricultural arena California’s $28 billion economy would put them fifth in the world, behind only the USA, Japan, China, France and Italy.

When you take into account the multiplier effect of the ag processing industries in the state, the ag sector accounted for 7.3% of all jobs and 6.5% of all income and taxes in the state.

Monday, March 24, 2008

A Hospital as a Legacy

If you haven’t seen the 2003 movie Seabiscuit, you really should. It is a wonderful true story about a plunky horse that during the Great Depression captivated a nation that was looking for come from behind stories.

The owner of Seabiscuit was Charles Howard, probably the most successful Buick salesman of all time who made a fortune selling cars in San Francisco. In the 1920s he purchased the 16,000 acre Ridgewood Ranch just south of Willits, CA (population 5,073) where Seabiscuit was trained. My wife and I stayed in Willits in our jaunt around northern California.

In the movie the death of Howard’s son Frankie is shown. Tragically, Frankie died in a truck accident on the ranch and died enroute by train to the closest hospital. Howard vowed that the lack of medical care would not happen again in Willits and built the Frank R. Howard Memorial Hospital in Willits as a tribute to his son.

While Seabiscuit is long gone, Charles Howard’s hospital is today a wonderful institution in a small town.

Friday, March 21, 2008

Rural Broadband

Wednesday’s blog on info from the National Lieutenant Governor’s Winter Meetings drew an interesting email from Roger Hahn, Executive Director of the Nebraska Information Network. He sent me statistics and info on the broadband penetration in his state, telling me, “In Nebraska 81% (instead of 31%) of rural residents have access to broadband. In Nebraska 99.98% (instead of 52%) of the urban residents have access available for broadband. And we have been at near these levels for three or four years….and most if not all of the rest of the States are catching up..look at the big push in Kentucky to catch-up.”

He provided me with data on availability by population center and competition within each of those centers, showing that any town over 300 in population had 100% coverage and 98.35% of those under 300 had the same broadband coverage. Fremont, Grand Island and North Platte (populations of from 23,000 to 43,000) each had 15 broadband suppliers, the same as Omaha and one more than Lincoln. Even tiny Raymond (population 186) had 9 suppliers.

Hahn also pointed out to me that while Japan and the EU might have faster bandwidth, their usage per unit of population is much lower than here in the USA.

I’m convinced that broadband is a necessity for economic development, as important as water, sewer and electricity. I’ve yet to have an industrial client show up on a site visit and ask me, “Do they have electricity here?” Broadband is already as important as the three other infrastructures and most rural communities that I know have the type of coverage that Roger Hahn emailed me.

Roger: Thanks for sending me the information on NE’s broadband coverage.

Thursday, March 20, 2008

Magnificant Redwoods

I’ve seen plenty of pictures of Redwoods but until I’d driven through them and stood next to them, I’d never had a correct perspective of the size of these trees compared to what I’ve seen up to now. My wife and I drove through some many redwood forests and towns that grew up around them.

One of the most interesting was Eureka, CA (population 26,128) which was built by timber barons but is today a funky artists’ community. One of the most interesting sites was the Carson Mansion, built by one of those lumber barons in 1884 to 1886. It is today one of the most incredible Victorian mansions that I’ve seen in my travels.

Wednesday, March 19, 2008

Lietenant Governors' Interests

I was in Washington DC last week to do a talk at the National Lieutenant Governor’s Winter Meetings. About 30 of the 50 Lieutenant Governors in the country were at the conference, although Lt. Governor David Paterson from NY who was to talk about his state’s renewable energy plan was a no-show with the unfolding drama of the Eliot Spitzer resignation.

There was quite a bit of discussion on the problems that have been encountered in 2008 with the presidential primaries, with suggestions that the USA develop a regional primary system that either divides states by population or location with primaries spread over a four month period from March to June. It sure seems to make a lot more sense to me than our current hodge-podge.

During the session on rural issues, in addition to my talk there were interesting talks on broadband and wind farms.

Former Federal Communications Commissioner Gloria Tristani related, “Only 31% of rural residents have access to broadband compared to 52% in urban areas. We also spend twice what Japan does for broadband and yet they have 20 times our bandwidth.”

John DiDonato, of FPL (Florida Power) Energy LLC, told of the push that Florida Power is making in alternative energy, specifically wind, “Right now we have 5,077 megawatts of wind power, which if they are all blowing would power over 1 million homes.” With 7,500 wind towers in their wind fleet, there is just under 1 megawatt/tower.

DiDonato explained the economics of the industry, especially for the landowners who agreed to place these wind towers on their farms, “We typically lease the land from landowners at $4,000 to $6,000/megawatt/year.”

The most shocking piece of information that he shared was that “the tax benefits of a 2.1 cent/kw federal tax credit and being able to depreciate over five years account for over 50% of the economic return of wind.”

While these types of incentives can really accelerate the development of new technologies like wind, it has been my experience that they are hard to do away with even when the economics of the industry couldn’t be better. With oil now over $110/barrel I wonder if anyone would stop looking for oil if the oil depletion allowance was done away with, or if ethanol production would fall if the 54 cent/gallon ethanol subsidy was done away with. I also wonder if even one acre of corn wouldn’t be planted if the new farm bill didn’t continue the massive subsidies to that crop and others.

Tuesday, March 18, 2008

Historical Signs on All Buildings

The discovery of gold in what would become Yreka, CA in March, 1851 quickly changed a peaceful flat knob into a bustling gold town. Within six years the town was incorporated, having passed 5,000 in population. It was known as the richest square mile in CA during the late 1850s.

The downtown from that gold rush still largely exists in Yreka, which today has a population of 7,290. There are many old magnificent buildings that date back to those days and on each of the buildings in the downtown there are very nice plaques that tell the history of each building. It’s an idea that other towns might want to copy.

Monday, March 17, 2008

Coming Back

“At one time we had 67 mills in Siskiyou County (CA—population 45,091) but today are down to only 2. In the early 1990s, we lost over 60% of the jobs in the county in just one year. All of my family had worked at International Paper for generations, but had to look for work in other places because of the change,” Josephine Wyatt, head of the Siskiyou Training and Employment Program, was explaining to me the major blow that hit her furthest northern most CA county.

That is a terrible blow to go through and while I don’t believe that Siskiyou County will ever fully recover (you never do—it is something that always stays within the subconscious of a community), they are making some valiant efforts. The county population is stable and they’ve got some good economic statistics. And, they’ve diversified their economic base well with lots of smaller employers.

Susan Molnoux, economist with the State Employment Service, related to the audience that 90% of the companies in the county have less than 20 employees and 62% have less than 4.

Nancy Swift head of the local ED efforts in entrepreneurship, JEDI (Jefferson Economic Development Initiative), assembled an impressive panel of her recent entrepreneurs. JEDI is now in its 10th year and has helped 485 new businesses to start in the county.

A new Enterprise Zone designation for the county could help to accelerate this growth in new jobs and businesses.

Friday, March 14, 2008

Importance of Foreign Sales

“China is the number one producer of walnuts. Five years ago they were a major exporter and competitor of ours. Today they are importing from us,” Vicki Lapera, VP of Sales & Logistics for Crain Walnut Shelling was explaining to me the changes that have occurred in the walnut market. Crain is the largest independent walnut producer in the world, following only Diamond Walnut which switched from being a coop into a stock company recently.

She went on, “And we’ve seen a dramatic increase in prices in the past several years. One of our standard products was $2.35/pound last year but is up to $4.50/pound now. We lost about 50% of our production when we had too much heat during the bloom.”

Chuck Crain, 50, started his company in 1982 seeing an opportunity in a switch from in-shell sales to more value added shelled products. His father and brother still run the family owned CR Crain In-Shell.

Crain exports to over 25 countries with the most important being: Germany, Canada, Israel, Australia, China, Japan, Korea, Spain and Italy. All of that from Red Bluff.

One final interesting tid-bit about walnuts is that there is a big market developing for the burl from walnuts. A burl is a type of wood in which the grain has grown in a deformed manner due to the grafting of the lighter grained English walnut onto the darker grained California black walnut. Today one older tree is often worth over $10,000 because of those burls.

Thursday, March 13, 2008

Wonderfully Diverse Red Bluff/Tehama County

“There are towns I know that would love to have just one event like the Red Bluff Round-Up (professional rodeo); Red Bluff Bull Sale; Boat Drags; or West Coast Monster Trucks, but you are fortunate to have all of them in addition to your wonderful array of Victorian Homes,” I told the 200 people at the Tehama County Seeds of Opportunity Outlook Conference in Red Bluff, CA (population 13,147). Each of those events brings from 20,000 to over 50,000 spectators into the community. In addition they host a fiddle championship, extreme summercross, car shows, civil war days, canoe drag races, horse shows and other events.

Red Bluff has a rich history dating back to the days when the steamboats made the 300+ mile runs from San Francisco up the Sacramento River to Red Bluff. Red Bluff was as far up the river that the boats could go and the town developed into a major trading center for the region.

The rich agricultural soils of the Sacramento Valley produce over $160 million of tree crops and other products in the county. The most important of which are: walnuts, almonds, prunes, olives and grapes. These products are exported to 45 different countries around the world.

A new harvest on the horizon for the county is a major Pulte Homes/Del Webb Community that is planned for the north part of the county. Economist Dr. David Gallo, one of the speakers at the conference showed that this project will be the major driver of economic activity in the next decade, possibly accounting for 85% of the growth in the economy during the next ten years.

It wasn’t hard to see why Del Webb decided to pick Tehama County for one of their next big planned communities.

Wednesday, March 12, 2008

From Losing Money to a New Niche

“My cousins and siblings and I are the 6th generation of the Burrows family in California. My great, great, great grandfather, Rufus Gustavis Burrows came to California with his parents in 1848 when he was 16 years old. We were a cattle ranch but in the 1970s and 80s we were losing money,” Tara Burrows was telling the history of the transition that started in 1985 with her grandfather, Bill Burrows.

In that year her grandfather started to expand into a new area of agri-tourism. Today, they produce 60 to 70% of the 3,500 acre ranch’s income from wildlife and 30 to 40% from cattle operations.

Hunting, mostly from returning hunters, provides 90% of that income. They also are experimenting with carbon sequestering through perennial grasses and beginning discussions about turning the ranch into a conservation easement so that it will remain undeveloped forever.

I’m convinced the potential for agri-tourism, niche agri-producers combined with the arts has great potential for certain areas of our country, especially places like northern CA with its rich and diversified agricultural base. Some of the possible stops in Tehama County, CA include: Julia’s Fruit Stand; Sodard Orchards Fruit Stand; Abbey of New Clairvaux Winery; Burnsine Vineyards; North Valley Farms; Pacific Sun Olive Oil; Antelope Creek Farm; Lucero Olive Oil; Corning Olive Oil; The Olive Hut; and The Olive Pit.

Tuesday, March 11, 2008

Fourth Generation Olive Producer Adds Value

“My grandfather used to produce olive oil, mostly to give to friends and family. His father also was an olive farmer as is my father. Olives are in my blood,” Dewey Lucero told me on the phone. I was talking to him prior to my talk in Red Bluff, CA.

He went on, “I got a degree in mechanical engineering at Cal Poly but have always loved farming. In December, 2005 with the help of my parents I started producing Lucero Olive Oil. We started small but have grown the business each year. Today we sell three different brands and have grown from 2,000 gallons the first year to over 8,000 gallons this past year.”

Dewey is teaming up with 4 other olive farmers to put in an olive press in his hometown of Corning, which bills itself as the Olive Capital of America. Having the press will allow him to have better control over the product and to grow the business into a full time operation.

Monday, March 10, 2008

Farmstead Cheeses--Wave of the Future

As I’m traveling around the country, I’m seeing a rapid growth in a number of farmstead products being produced all over the USA. Two of the most prevalent and ones which I think have the potential to become the next product like American wine are; specialty cheeses and olive oil. I visited one of each this past week on a wonderful 1,100 mile trip through northern CA and will be blogging on them today and tomorrow.

“Dad and Mom moved our cows here on New Year’s Day 1999. We moved from Merced which is 3 hours south of here because we saw ourselves getting squeezed by the mega-dairies and wanted to maintain our small dairy operation. Plus, we wanted to add value to our product by making it into cheese,” Mandy Johnson was telling me about her Pedrozo Cheese that she produces every couple of days on their home dairy near Orland, CA.

Her dad, Tim Petrozo milks and cares for the 30 cows and Mandy makes the cheese and then sells it at farmers markets in the area. They produce about 200 pounds of cheese into nine different varieties all made from raw, whole milk. Each is a “semi-firm” Gouda and/or cheddar type of cheese. Some are made only in the spring when the grasses on the farm are at their best.

“Ours is the only grass fed cheese operation in the entire state,” Mandy related to me. My wife and I could attest to its wonderful texture and flavor as we snacked on it during our days of touring the north country. We also signed up for their cheese of the month club.

I’m convinced that you are going to be seeing many more farming operations like Pedrozo Dairy & Cheese Company. Producing a wonderful product like they are on only 20 acres of land shows what is possible.

Friday, March 07, 2008

I'm Ok but You're Not?

When Harris Interactive recently asked people in the USA how they were doing, 76% said that things were going in the right direction for them. But when asked about how things were in their state it fell to only 44% and to 23% when asked about things in the country.

I’ve become more convinced that we’ve become a country of worriers. Last year 2/3 of Americans thought we were in a recession, when in fact, all of the economic data from this past year clearly showed that we were not.

We scared ourselves to death in the 70s when we thought that OPEC was going to rule the world, in the 80s when the Japanese were going to buy up all of California (Do you remember when the land under the Imperial Palace was worth more than ALL of California?), in the 90s with the “giant sucking sound to Mexico” and today with offshoring.

My guess is that we’ll find something new to worry about in five years. Meanwhile, we’ll have added several million new jobs, the economy will continue to grow, we’ll be doing even better than we were in 2008 but we’ll continue to think we are going off the cliff.

Thursday, March 06, 2008

The Sap is Flowing

A small ad in the local newspaper that advertised an open house at Hilltop Maple Syrup this past weekend caught my attention so my wife and I took a Brazilian family that was visiting us out to see how you make maple syrup.

Orville Alwardt has been producing maple syrup in IL for the past five years, gradually growing production each year. Last year he produced over 300 gallons in his farm based business, diversifying away from only producing corn and soybeans.

Orville is a talkative and engaging sort who showed us his processing and bottling operation, “The sap just started flowing yesterday. We were concerned that we wouldn’t have anything to show at our open house. We have to have freezing nights and warm days to get it flowing.”

He explained how he collects the sap, “We bore holes in the trees, from one to four depending upon the size of the tree. But unlike the old days when you hung buckets under those bores, we have installed a tube system that utilizes gravity and a partial vacuum.”

It takes about 40 gallons of sap to make one gallon of maple syrup. The sap has to be heated, which Orville does with a corn burner, boiling off the water in the sap, leaving the delicious syrup.

Illinois will never touch the production of VT, ME or NY but I firmly believe that there are numerous opportunities for agricultural niche producers in products like maple syrup, honey, flowers and numerous other non-traditional agricultural products.

Wednesday, March 05, 2008

Lightening Bug

Lake Land College, our local community college, hosted their first annual Energy Innovation Conference last week and I was invited to open off the proceedings. The two day conference had a two prong focus of how to conserve energy and how to produce alternative forms of energy. There were many entrepreneurs there, some exhibiting some very innovative new products they’ve developed in the area.

One of Lake Land’s technology courses exhibited an electric car, nicknamed the Lightening Bug. The converted VW Bug has over a dozen batteries in it, the only downside of which was that the weight of those batteries appeared to be bowing the car a bit.

Since 2001, venture capitalists have increased their focus toward less capital intensive projects that are focused upon the development of cleantech technologies. Cleantech can further be subdivided into energy production (wind, solar and biofuel); energy storage; industrial processes (water purification, food safety); and energy services. Last year over $2 billion was invested in this new area, up from $205 million in 2001.

With that type of investment increase, the enthusiasm I witnessed at Lake Land and the number of people putting their brains toward discovering new products and processes, I’m convinced that our best days lie in the future.

Tuesday, March 04, 2008

Down but not Out

Some of my favorite tours of the USA were ones that I took over 2 weeks in North Dakota a couple of years ago, often doing two and three talks/day and seeing some incredible country. I found the people to be some of the friendliest I’ve met and with an intense pride in their towns and searching for ways to keep them viable.

One of the towns that I visited was Crosby, ND, located in the NW corner of the state. I continue to receive their weekly newspaper and read it every week. About 50 miles due east of Crosby, in the adjoining county, is Bowbells (population 406) which is also the county seat for Burke County (population 1,947).

At the end of January the local grocery store shuttered its doors and residents of Bowbells are faced with having to drive the 16 miles to the nearest store. However, the Burke County ED group is looking at starting a food coop to help hold the town together. I hope that they are able to do so.

Burke County is on the one extreme in the USA. In 1970 the population was 4,739 but over the next 38 years they’ve lost over 50% of that population to deaths and people moving away. Since 1990 only six counties out of the 3,141 in the USA have lost more on a percentage basis. The average age is 49.6 years, almost 40% greater than the national average and there are only 1.8 people per square mile. This is very rural and very sparsely populated country.

Counties like Burke don’t deserve to die without a fight. I’m rooting for them as they try to keep a grocery store.

Monday, March 03, 2008

Your House as an Investment

My grandfather never thought of his house as an investment. It was where he lived. He built it to last and it does some 85 years later, but he never would have considered it as something that would hopefully go up in value. Houses didn’t do that, they started going down in value as soon as you finished them.

His grandchildren have a different thought on housing, or at least they did until recently when we saw the top in residential real estate values in all of the hottest real estate markets of the past decade and more.

I’d tried to find some historical data on housing values when I was doing a recent Agurban e-zine, but didn’t find it until after I’d finished that piece. This graphic from a recent Business Week shows that from 1890 until 1945, except for a few brief periods of time, a house lost value. It wasn’t until after WWII that housing started to not only hold its value but actually increase in value. The sharp spike upward in about 1998 sure looks like an anomaly to me and we could see a continuing downward pressure upon housing values if they return to a more normal trend line.